Britain’s Second Quarter GDP Numbers Disappoint

The one thing I continue to worry about even as this economy appears to be on a very slow mend is another shoe dropping. I don’t think that just happened but here’s a poignant reminder that there are a lot of boots hanging over our heads.

The Telegraph is reporting that the U.K. had a much larger than expected decline in second quarter GDP and, so far, the statistics nicely mirror the first year of the Depression:

Economic output shrank by 5.6pc in the 12 months to the middle of the year, according to official figures which shattered hopes that the recovery has already begun.

The Office for National Statistics said that Britain’s gross domestic product (GDP) contracted by 0.8pc in the second quarter, following the unprecedented 2.4pc fall in the first three months of the year. Economists had expected GDP – the broadest measure of the country’s economic performance – to shrink by 0.3pc.

According to calculations by Martin Weale of the National Institute for Economic and Social Research the profile of the current recession is now almost identical to the decline in Britain’s output between 1929 and 1931. The 5.6pc contraction over the past year almost matches the 5.8pc fall in the year preceding the second quarter of 1931, during which Credit Anstalt in Austria collapsed, triggering a second wave of economic seizure across Europe.

The recession is far deeper and more severe than those of the early 1980s and 1990s, Mr Weale added.

“Gordon Brown is now competing with Ramsay MacDonald – not a comparison he would much like,” he said. “It looks as if we are pretty much tracking the 1930s,

“The financial crisis has been much bigger [than in the 1930s], the period of boom beforehand was more marked; and so you might think it’s thanks to the policies [from the Bank of England and Government] that we’ll end up with something slightly less bad but along similar lines.”

I think you can make too much out of the similarities between periods and I doubt that the U.K. is heading down the depression road. Their governmental response has been vigorous and properly targeted and while the numbers are still horrible, the trend is at least their friend. Nevertheless, the longer they suffer, the less likely are we to see any robust recovery.

Chart: Telegraph

About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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